Exploring responses to the need for new antibiotics: How do different incentives compare? Chantal Morel “Collaboration for Innovation – The Urgent Need for New Antibiotics” Brussels, 23 May 2011 Sponsored by Action for Antibiotic Resistance - ReAct
LSE Report 2009 • ‘Policies and Incentives to promote innovation in antibiotic research’
Background: Why are so few new antibiotics being developed? • Regulatory environment – Lack of diagnostics – Low tolerance for side effects – Lack of clear guidelines – Shifting of requirements • Perceived low profitability – Generics – Conservation policies – Short duration of treatment and low relative prices
Net present value estimations Oral contraceptive Liver transplant AS ‐ psoriasis Injectible antibiotic (Gm+) Vaccines Oncology CNS Musculo skeletal 0 200 400 600 800 1,000 1,200 1,400 Risk adjusted NPV x $1,000,000, Source Projan 2003
Is there justification for intervention in the market? • High probability of an impending health crisis • Market failures • Unattractiveness of the market • High cost of resistance
Types of financial intervention pull lego-regulatory push combinations
1. Grants and fellow ships PUSH 2. Funding for translational research 3. Support for open-access research 4. Product development partnerships 5. Research-related tax incentives 6. Monetary End Prizes (MEP) PULL 7. Health Impact Fund (HIF) 8. Buy-Out (BO) 9. Patent pool 10. Research tournaments 11. Advanced market commitments (AMC) 15. Accelerated assessment LEGO- REGULATORY 16. Accelerated approval (PULL) 17. Vouchers for accelerated assessment 18. Pricing & Reimbursement adjustments (P& R) 19. IP extensions 20. Wildcard patent extensions 21. Anti-trust w aivers 22. Antibiotics and Conservation Effectiveness model (ACE) 12. Call Options for Antibiotics model (COA) HYBRID PUSH- PULL 13. Orphan drug legislation (OD) 14. Special designation for priority antibiotics (SDA)
Report: ‘A strong pull mechanism complemented by some push funding (either as part of hybrid mechanism or combined within a package of incentives)’ Shortlist: Pull incentives (including lego-regulatory incentives) 1. Monetary End Prizes (MEP) 2. Buy-Outs (BO) 3. Advanced Market Commitments (AMC) 4. Health Impact Fund (HIF) 5. Pricing and Reimbursement adjustments (P&R) 6. Antibiotic Conservation and Effectiveness programme (ACE) Push-pull incentives 7. Orphan Drug incentives (OD) 8. Call Options for Antibiotics model (COA) 9. Special Designation for priority Antibiotics incentives (SDA)
Criteria for comparative assessment • Decoupling of profits and the recouping of R&D costs from sales • Decoupling of profits and the recouping of R&D costs from prices • Share risk between funder and developer • Likely beneficiaries • Achieve political support • Encourage purchase of best drug available on market • Use market to determine optimal reward size or need for external financing of the incentive • Offer rewards solely for successful research • Avoid principal-agent problems • Promote clear communication surrounding priorities and willingness to pay • Help overcome Tragedy of the Commons • Encourage competition • Encourage follow-on innovation • Estimated relative transaction costs associated with implementation of the incentive • Expected timeframe to implement the incentive • Amount of new legislation or institutional infrastructure required • Issues surrounding the incentive’s potential to spur desired R&D in the short-term • Clear hurdles and barriers • Experiences with mechanism to date
Monetary prizes FOR AGAINST Reward only successful research Ex ante calculation of prize amount poses numerous challenges All risk is borne by the developer The adoption of milestone payments can help recoup investment costs earlier, reducing the risk to the The adoption of milestone developer payments increases the risk of Conditions such as prohibition of subsidizing research that marketing activities or pricing never reaches the market could be added (but will increase the necessary magnitude)
Buy-out FOR AGAINST Reward only successful research Ex ante calculation of Decouples sales from prize amount poses the recouping of R&D numerous challenges costs which can All risk is borne by the improve socially developer beneficial market segmentation (e.g. between rich and poor countries) and help reduce over- marketing
Advanced Market Commitments (AMC) FOR AGAINST Predetermined price/volume Commitment may lead to reduces risk to developer rewarding the development of Align incentives for the funder, a product that is ultimately of developer and user early in the lesser quality than another that development process has been developed in the Reward only successful research interim May increase size of market Pressure for developer to sell enough to move beyond the units covered in contract Risk of over-purchase of product leading to political risks and pressures to absorb drug within health system (may require stockpiling)
Pricing & Reimbursement reforms FOR AGAINST Member States individually Could allow for prices to too small to affect market better reflect the true value of antibiotics Incentive much stronger if can be done on a European No requirement to quantify level but would be size of reward outright challenged on basis of Direct influence on subsidiarity (so would be prescribers and patients very challenging) could help reduce over- prescription/consumption Avoids “incentive creep”
Orphan drug (package) FOR (eligibility <5 in 10,000 pop) Successful for rare diseases • Fee waivers (small markets) • Scientific advice AGAINST • Access to central • Prices may be approval unjustifiably high • Tax incentives at MS • Current abuse of legislation level • Opposition to application • Extended market of market exclusivity exclusivity component • Has been unsuccessful so far for antibiotics
Special Designation for priority antibiotics (package) FOR • Fee waivers • Similar incentives to orphan • Scientific advice legislation but without most contentious pieces and without • Access to central the rarity barrier approval • EMA experience with similar • Tax incentives at MS mechanisms level • Fair pricing component can help Europe influence the price • Extended data exclusivity of the drug in poorer countries • Fair pricing condition tied while maintaining a “light to exclusivity touch” AGAINST • Marketing prohibited • (for very small markets • Dependent on reasonable market size can add an EU purchase commitment)
Call Options model for Antibiotics FOR AGAINST Risk-sharing between funders and Relies on thorough evaluation of developer potential products (which is potentially hindered by asymmetry Lowers barriers to entry of information) Spreading cost of drug purchase may Risk of gaming (although this may be render it more fiscally feasible mitigated by reputation concerns) than other pull mechanisms and improve externally perceived Higher prices would be faced by viability/credibility those not taking part in the options scheme Quality markers allow for magnitude of reward to be a function of Commitment may lead to rewarding innovation the development of a product that is ultimately of lesser quality than another that has been developed in the interim
Antibiotic Conservation and Effectiveness (ACE) Programme (package) FOR • Value-based • Aligns industry reimbursement, tied incentives with public to antibiotic health incentives stewardship and infection control • Market exclusivity tied AGAINST to drug efficacy • Politically difficult to • Limited antitrust implement waivers
Health Impact Fund FOR AGAINST • Complete separation of • Reward tied to sales prices from recouping of • Explicit incentives to R&D costs and profits market • Would lead R&D towards areas where gains would be greatest • Improve access through low prices
Conclusions • The EU should not be afraid to go it alone • Several trade-offs will need to be made but need to act • There is currently an appetite for bold moves to be made • In longer term need overall re-alignment of overall investment drivers with therapeutic need
Thank you Current LSE group projects related to antibiotics (email C.M.Morel@lse.ac.uk for details) • Estimation of antibiotic market sizes • Exploration of supply and demand bottlenecks within diagnostics market • Analysis of global fair pricing strategies
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